Mike Andes (founder, Augusta Lawn Care) explains when and how debt can accelerate small-business growth versus bootstrapping. He uses a capacity metaphor (trucks represent operational capacity) to show that debt lets you buy assets and stay in 'growth mode' rather than pausing to accumulate profits. He warns debt can mask an unprofitable business and lead to bankruptcy if misused, recommends using low-rate, collateralized loans specifically for growth assets (trucks/equipment), and notes lenders' refusal can indicate unreadiness. Concludes with a CTA for the Blue Collar Summit (January 2025).
My name is Mike Andes. I'm the founder of Augusta Lawn Care. We have over 150 locations around the world. Now, over the past year, I've traveled to over 30 small businesses around America, all inside this book. And the one common denominator between the ones that went bankrupt and failed was the fact that they all had debt. Today we're gonna be talking about how you can use debt to grow your business and it doesn't kill you.
Now, when we look at growing your business using debt versus bootstrapping, this is what it's going to look like in terms of the growth of your business using debt. You can see these little lines here. This is what I call capacity. This you could say, is one truck, two trucks, and you could go as high as you would want. It's how much revenue can I do before finally I literally cannot get any more customers. I can't grow the business anymore without buying another truck because this is my capacity. And I literally am working this thing five, six days a week full time, 10, 12 hours a day. Well, if you have debt, guess what you do? You go buy another truck and then you hit another capacity when you're like, oh man, I'm still growing. The business is doing fantastic. Well, if you're using debt and you just go finance the truck, guess what you do? You buy another truck. And this is what allows you to be able to grow really, really fast. Cause you don't have the constraints of having too little of capital. Now this is what happens if you bootstrap and you don't take any debt, is when you hit this one truck capacity limit, you might actually have to stop and you have to stay here for a little bit. Because at this stage is when you're going to raise prices and enter what I call profit mode. Now, inside of when you have debt, you don't need to be in profit mode because you have plenty of cash set aside and you just keep going into debt to be able to continue growing. Whereas if you're bootstrapped, you don't have the ability to get debt. You're going to go into profit mode when you're at capacity. In other words, if you, in order to get more customers and grow the business, you'd have to buy more trucks, hire more people and get more equipment. Well, I can't afford that. I don't have any debt. I don't wanna go into debt. I don't have the loans and the capital to go get a second truck. So you stay in what I call profit mode. Instead of staying constantly in growth mode. Growth mode is simply when you hit capacity, you buy more trucks, equipment and hire more people. And you're able to stay in growth mode much longer if you have debt. Because at every one of these stages, I just go buy more truck, hire more people and buy more equipment. Over here I'm staying in profit mode. I'm stacking money aside before finally I'm able to then buy the second truck and continue to grow the business. So this takes much, much longer. And so this is a way of looking at debt, makes your business grow faster. Not really. What it does is every time you hit a constraint, you're able to buy trucks, equipment and hire people because you have the capital available. If you don't, you're going to have to stay in profit mode. You're going to have to make some money yourself. Stack that aside maybe for a year or two and then you can continue to grow the business once you have enough capital to go buy the second truck, hire more people and get more equipment. Now after this, you're probably like, well, I should get a ton of debt, I should stay in growth mode, continue to grow my business, kill all my competition. Well, let's talk about some of the dangers of debt, because I like to think about debt as potentially being a short term solution to, to a long term problem. The long term problem is you might have an unprofitable business. And if you have a whole bunch of debt, it's like eating candy and being like, I feel great. Yeah, after you eat the candy bar, it feels great for like what, 20 minutes? You get a sugar high, you're like, mmm, oh good.
That's like debt. It tastes good in the moment, but in the long term solution, you need to fix the business. The long term solution is going to the gym, picking up some dumbbells, getting some kettlebells, building your immunity, building up some muscle, increasing your metabolism. But no one wants to do the hard work required to actually build the muscle, increase their metabolism. Go to the gym. That's hard work. Creating a profitable business is hard work. The problem I find so oftentimes with debt is people are looking for short term solutions to feeling good. And guess what? If you had debt today, all of a sudden, all the pain you feel of not making payroll will, will be fixed. But you're likely just pushing it down the road because you never actually did the harder work and the more long term pain of building a business that's profitable. And that in the long term is what we're really trying to achieve. I think of debt as being a very powerful tool. That's why literally the entire country, the United States, was built on the back of debt. It's very powerful, but if you put it in the hand of a kindergartener, it can be extremely dangerous. And so when it comes to building your business, you've gotta figure out if you're using the tool to stay in growth mode, continue to grow the business, or if you're just taking a short term pain pill, that's going to lead to a lot more pain down the road because you have an unprofitable business and this will blend into a bunch of debt. No profitability. And now you're stuck. And that's what we call bankruptcy. Now in my personal opinion, I like to use debt for really only one part of the business and that is to fund the assets required to continue growing the trucks and equipment. A lot of times that's also the debt that you can get the lowest interest rates on and the best terms because it's collateralized. If you don't pay, they'll come pick up the equipment, they'll come pick up the truck. I like to use that kind of debt if I'm going to use any debt at all to be able to get the assets required so I can continue to grow the business. Now, one word of caution here, and that is this. If your bank is not wanting to give you any sort of debt, this is a good indication you're probably not ready for it. They're not going to hand you this axe over here. They're not going to allow you to have the candy bars. If they don't see the discipline of going to the gym and working out and staying healthy. If they don't see you actually protecting safety in your finances, they're not going to give you the axe. They're not going to give you all of that debt. So instead of trying to make the whole goal and purpose of being a business to qualify for the loan, realize that there's underwriters and all of these processes are put in place and like the small Business Administration and that whole qualification process is put in place to make sure you don't take on too much risk and that your business is actually profitable enough to pay off that debt in the long term. Using debt to grow your business fast is great and all. However, you know what's better? Coming to Blue collar summit in January 2025, you want to take your business to the next level. Get tickets for your manager, you and your spouse@bluecallersummit.com.
